UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended December 31, 2023

☐ Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from  to

(Registrant'sRegistrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

8000 North Federal Highway, Suite 100

Boca Raton, Florida 33487

561-939-3300

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] ☒ No [ ]☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No[ ] ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 12(a) of the Exchange Act [  ]☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ]  ☐ No [X ] ☒

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes[ ] No[ ]Yes ☐ No ☐

Securities registered pursuant to Section 12(b) of the Act:

CLRI

 NONE

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer'sissuer’s classes of common stock, as of the latest practicable date: 228,780,695229,160,695 shares as of February 10, 2023.13, 2024.

The accompanying notes are an integral part of these consolidated financial statementsCLEARTRONIC, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

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The accompanying notes are an integral part of these consolidated financial statementsCLEARTRONIC, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

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CLEARTRONIC, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE THREE MONTHS ENDED DECEMBER 31, 2023

(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements

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CLEARTRONIC, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT

FOR THE THREE MONTHS ENDED DECEMBER 31, 2022

(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements

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CLEARTRONIC, INC. AND SUBSIDIARIESSUBSIDIARY

Notes to Condensed Consolidated Financial Statements

December 31, 20222023

(Unaudited)

NOTE 1 - ORGANIZATION

Cleartronic, Inc. (the "Company"“Company”) was incorporated in Florida on November 15, 1999. All current operations are conducted through the Company'sCompany’s wholly owned subsidiary, ReadyOp Communications, Inc. ("ReadyOp"(“ReadyOp”), a Florida corporation incorporated on September 15, 2014. ReadyOp facilitates the marketing and sales of subscriptions to the ReadyOp™ and ReadyMed ™ReadyMed™ platforms and the AudioMate IP gateways discussed below.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements contain the consolidated accounts of Cleartronic, Inc. and its subsidiary, ReadyOp Communications, Inc. All material intercompany transactions and balances have been eliminated.

BASIS OF PRESENTATION

The financial statements are prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“U.S. GAAP”). The unaudited interim financial information furnished herein reflects all adjustments, consisting only of normal recurring items, which in the opinion of management are necessary to fairly state the Company’s financial position, results of operations and cash flows for the dates and periods presented and to make such information not misleading.  

These unaudited financial statements should be read in conjunction with the Company’s audited financial statements for the year ended September 30, 2022,2023, contained in our General Form for Registration of Securities of Form 10-K as filed with the Securities and Exchange Commission (the “Commission”) on December 29, 2022.21, 2023. The results of operations for the three months ended December 31, 2022,2023, are not necessarily indicative of results to be expected for any other interim period or the fiscal year ending September 30, 2023.2024.

USE OF ESTIMATES

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and operations for the reporting period.

Although these estimates are based on management'smanagement’s knowledge of current events and actions it may undertake in the future, they may ultimately differ from actual results.

Significant estimates include the assumptions used in valuation of deferred tax assets, estimated useful life of property and equipment, valuation of inventory and allowance for doubtful accounts.credit losses.

CASH AND CASH EQUIVALENTS

For financial statement purposes, the Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.

The Company did not own any cash equivalentshas investments Treasury Bills. The Treasury Bills have remaining terms ranging from four-week month to thirteen weeks on December 31, 2022 and September 30, 2022.2023.

ACCOUNTS RECEIVABLE

The Company providesTreasury Bills with an allowance for uncollectible accounts based upon a periodic revieworiginal maturity date of three months or less are included within cash and analysis of outstanding accounts receivable balances. Uncollectible receivables are charged to the allowance when deemed uncollectible. Recoveries of accounts previously written off are used to credit the allowance account in the periods in which the recoveries are made. When a client is invoiced, the amount is recorded as an asset in Accounts Receivable and as Deferred Revenue in Current Liabilities. When payment is received the amount is moved to Cashcash equivalents on the balance sheet and Accounts Receivables are reduced. The amount listed as Deferred Revenue is amortized monthly over the license period.at December 31, 2023. 

ACCOUNTS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES

The Company maintains current receivable amounts with most of its customers. The Company regularly monitors and assesses its risk of not collecting amounts owed by customers. This evaluation is based upon an analysis of current and past due amounts, along with relevant history and facts particular to the customer. The Company records its allowance for credit losses based on the results of this analysis. The analysis requires the Company to make significant estimates and as such, changes in facts and circumstances could result in material changes in the allowance for credit losses. The Company considers as past due any receivable balance not collected within its contractual terms.

The Company provided $18,000$92,665 and $18,000$63,665 allowances for allowances of doubtful accounts as of December 31, 20222023, and September 30, 2022,2023, respectively.

PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist primarily of deferred subscriber costs and prepaid expenses. Deferred subscriber costs totaling $25,500$25,500 and $38,250$38,250 at December 31, 20222023 and September 30, 2022,2023, respectively. Prepaid expenses totaling $25,667$85,575 and $18,165$68,522 at December 31, 20222023 and September 30, 2022, respectively are primarily for insurance and other items2023, respectively.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost and depreciated or amortized using the straight-line method over the estimated useful life of the asset or the underlying lease term for leasehold improvements, whichever is shorter or when the property and equipment is put into service.

INTANGIBLE ASSETS

The Company’s intangible assets consist of fees paid to outside consulting services and employees that are assisting us in obtaining FedRAMP certification. At December 31, 2023, The Company had intangible assets with a cost of approximately $121,392, with finite lives. The Company amortizes intangible assets with finite lives over the shorter of their estimated useful or legal life. The useful life is reevaluated for each reporting period. For the three months ended December 31, 2023, no amortization expense was recorded.

The Company evaluates intangible assets with finite lives for impairment at least annually or when events or changes in circumstances indicate that an impairment may exist. The Company determined that none of its intangible assets were impaired during the three months ended December 31, 2023.

CONCENTRATION OF CREDIT RISK

The Company currently maintains cash balances at one FDIC-insured banking institution. Deposits held in non interest-bearing transaction accounts which are insured up to a maximum of $250,000$250,000 at all FDIC-insured institutions. As of December 31, 20222023 and September 30, 2022,2023, the Company had $15,720$0 and $208,135,$118,140, respectively, in excess of FDIC insuranceinsured limits.

RESEARCH AND DEVELOPMENT COSTS

The Company expenses research and development costs as incurred.

For the three months ended December 31, 20222023 and 2021,2022, the Company had $21,815$13,559 and $49,260$21,815 respectively, in research and development costs.

REVENUE RECOGNITION AND DEFERRED REVENUES

The Company revenue recognition policy follows guidance from Accounting Standards Codification (ASC)(“ASC”) 606, Revenue from contract with customers. Revenue is recognized when the Company has transferred promised goods and services to the customer and in the amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. The Company applies the following five-step model in order to determine this amount:

i. Identification of Contact with a customer;

ii. Identify the performance obligation of the contract

iii. Determine transaction price;

iv. Allocation of the transaction price to the performance obligations; and

v. Recognition of revenue when (or as) the Company satisfies each performance obligation.

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The Company generates revenue primarily through the sale of software licenses and integrated hardware and software licenses.hardware. The portion of the contract that is associated with ongoing hosting and related customer service is amortized monthly over the license period. The Company incurs certain incremental contract costs (referred to as deferred subscriber acquisition costs, net) including selling expenses (primarily commissions) related to acquiring customers. Deferred subscriber acquisition costs, net are included in prepaid and expenses and other current assets on the consolidated balance sheet. Commissions paid in connection with acquiring new customers are determined based on the value of the contractual fees. Deferred subscriber acquisition costs will be expensed as incurred on the date the revenue associated with the cost is recognized. As of December 31, 2022 and September 30, 2022, respectively, the Company recorded $25,500 and $38,250, respectively, in deferred subscriber costs, which are included as a component of prepaid expense.

In transactions in which hardware is sold to a customer, the Company recognizes the revenue when the hardware has been shipped to the customer. The hardware supplied by the Company does not require a related software license and can be operated and fully functional without the Company'sCompany’s software.

From time to time clients request special training meetings. We send employees to these meeting and charge our clients on a per diem basis. These charges are recorded as consulting fees on our income statement.

The Company allocates the transaction price to each performance obligation based on a relative stand alone selling price. Revenue associated with the sale and installation of system licenses is recognized once installation is complete.

Customer billings for services not yet rendered and hardware not yet installed are deferred and recognized as revenue as services are provided. These fees are recorded as current deferred revenue on the consolidated balance sheet as the Company expects to satisfy any remaining performance obligations as well as recognize the related revenue within the next twelve months. Accordingly, the Company has applied the practical expedient regarding deferred revenue to exclude the value of remaining performance obligations if (i) the contract has an original expected term of one year or less or (ii) the Company recognizes revenue in proportion to the amount it has the right to invoice for services performed.

Under an agreement with the School District of Hillsborough County Florida, the District has approved an agreement with the Company whereby the Company will provide 500 units of its AudioMate AM360 Radio gateways to a third party, Centegix, which will be installing the gateways under their agreement with the School District. Centegix has paid the Company for the gateways in advance and the deposit is accounted for in deferred revenue. The estimated completion date for the project is August 31, 2024.

As of December 31, 20222023 and September 30, 2022,2023, respectively, the Company recorded $901,872$1,527,884 and $1,125,511,$1,177,680, respectively, in deferred revenue.

DISAGGREGATED REVENUE

The following table sets forth the approximate net sales by primary category:

DEFERRED REVENUE

The following table provides a summary of the changes included in deferred revenue during the three months ended December 31, 20222023 and year ended September 30, 2022:2023:

EARNINGS PER SHARE

Earnings per share ("EPS"(“EPS”) are the amount of earnings attributable to each share of common stock. For convenience, the term is used to refer to either earnings or loss per share. EPS is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Pursuant to ASC Paragraphs 260-10-45-10 through 260-10-45-16, basic EPS shall be computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the period. Income available to common stockholders shall be computed by adding both the dividends declared in the period on preferred stock (whether or not paid) and the dividends accumulated for the period on cumulative preferred stock (whether or not earned) from income from continuing operations (if that amount appears in the income statement) and also from net income. The computation of diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued during the period to reflect the potential dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock options or warrants.

Pursuant to ASC Paragraphs 260-10-45-45-21 through 260-10-45-45-23 Diluted EPS shall be based on the most advantageous conversion rate or exercise price from the standpoint of the security holder. The dilutive effect of outstanding call options and warrants (and their equivalents) issued by the reporting entity shall be reflected in diluted EPS by application of the treasury stock method unless the provisions of paragraphs 260-10-45-35 through 45-36 and 260-10-55-8 through 55-11 require that another method be applied. Equivalents of options and warrants include non-vested stock granted to employees, stock purchase contracts, and partially paid stock subscriptions (see paragraph 260–10–55–23). Anti-dilutive contracts, such as purchased put options and purchased call options, shall be excluded from diluted EPS. Under the treasury stock method: a. Exercise of options and warrants shall be assumed at the beginning of the period (or at time of issuance, if later) and common shares shall be assumed to be issued. b. The proceeds from exercise shall be assumed to be used to purchase common stock at the average market price during the period. (See paragraphs 260-10-45-29 and 260-10-55-4 through 55-5.) c. The incremental shares (the difference between the number of shares assumed issued and the number of shares assumed purchased) shall be included in the denominator of the diluted EPS computation.

As of December 31, 20222023 and 2021,2022, we had no options and warrants outstanding.

As of December 31, 20222023 and 2021,2022, we had 512,996 shares of Series A Convertible Preferred stock outstanding, which are convertible into 51,299,600 shares of common stock.

As of December 31, 20222023 and 2021,2022, we had 3,209,5033,133,503 and 3,341,5033,209,503 shares of Series C Convertible Preferred stock outstanding, respectively, which are convertible into 16,047,51515,947,515 and 16,707,515 shares of common stock, respectively.

As of December 31, 20222023 and 2021,2022, we had 670,904 shares of Series D Preferred stock outstanding which are convertible into 3,354,520 shares of common stock.

As of December 31, 20222023 and 2021,2022, we had 3,000,000 shares of Series E Convertible Preferred stock outstanding which are convertible into 300,000,000 shares of common stock.

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The table below details the computation of basic and diluted earnings per share ("EPS"(“EPS”) for the three months ended December 31, 20222023 and 2021:2022:

The following table sets for the computation of diluted earnings per share:

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company measures the fair value of its assets and liabilities under ASC topic 820, "Fair“Fair Value Measurements and Disclosures"Disclosures”. ASC 820 defines "fair value"“fair value” as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There was no impact relating to the adoption of ASC 820 to the Company'sCompany’s consolidated financial statements.

ASC 820 also describes three levels of inputs that may be used to measure fair value:

- Level 1: Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities traded in active markets.

- Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

- Level 3: Inputs that are generally observable. These inputs may be used with internally developed methodologies that result in management's best estimate of fair value.

Financial instruments consist principally of cash, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses and deferred revenue. The carrying amounts of such financial instruments in the accompanying consolidated balance sheet approximate their fair values due to their relatively short-term nature. The carrying amounts approximate fair value. It is management'smanagement’s opinion that the Company is not exposed to any significant currency or credit risks arising from these financial instruments.

INVENTORYAs of December 31, 2023 and September 30, 2023, we held no assets that were required to be measured at fair value on a recurring basis. There were no transfers between levels in the fair value hierarchy during three months ended December 31, 2023 and year ended September 30, 2023, respectively.

INVENTORY

Inventory consists of components held for assembly and finished goods held for resale or to be utilized for installation in projects. Inventory is valued at lower of cost or net realizable value on a first-in, first-out basis. The Company'sCompany’s policy is to record a reserve for technological obsolescence or slow-moving inventory items. The Company only carries finished goods to be shipped along with completed circuit boards and parts necessary for final assembly of finished product. All existing inventory is considered current and usable. The Company recorded no reserve for obsolete inventory as of December 31, 20222023 and September 30, 2022,2023, respectively.

At December 31, 20222023 inventory was $21,097$27,646 of raw materials and $0 of finished goods.materials.

At September 30, 2022,2023, inventory was $21,097$21,913 of raw materials and $0 of finished goods.materials.

ADVERTISING COSTS

Advertising costs are expensed as incurred. The Company had advertising costs of $13,149$22,584 and $5,025$13,419 during the three months ended December 31, 20222023 and 2021,2022, respectively.

RECENT ADOPTED ACCOUNTING PRONOUNCEMENTS

All newly

Troubled Debt Restructurings and Vintage Disclosures

In March 2022, the Financial Accounting Standards Board (the “FASB”) issued ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”), which eliminates the accounting guidance on troubled debt restructurings (“TDRs”) for creditors in ASC 310, Receivables (Topic 310), and requires entities to provide disclosures about current period gross write-offs by year of origination. Also, ASU 2022-02 updates the requirements related to accounting for credit losses under ASC 326, Financial Instruments – Credit Losses (Topic 326), and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty. ASU 2022-02 was effective for the Company October 1, 2022. The adoption of ASU 2022-02 did not have a material impact on the Company’s consolidated financial statements.

RECENT ISSUED ACCOUNTING PRONOUNCEMENTS

The Company continues to monitor new accounting pronouncements butissued by the FASB and does not yet effectivebelieve any accounting pronouncements issued through the date of this report will have a material impact on the Company’s Financial Statements.

In the current year, the Company adjusted its classification of selling and administrative expenses in the Statement of Operations. For comparative purposes, amounts in the prior years have been deemed either immaterialreclassified to conform to current year presentations. These reclassifications had no effect on previously reported results of operations or not applicable.retained earnings.

LEASE ACCOUNTING

We determine if an arrangement is a lease, or contains a lease, at inception and record the leases in our financial statements upon lease commencement, which is the date when the underlying asset is made available for use by the lessor.

We have a lease agreement with lease and non-lease components and have elected to utilize the practical expedient to account for lease and non-lease components together as a single combined lease component, from both a lessee and lessor perspective with the exception of direct sales-type leases and production equipment classes embedded in accordance with ASC 842, Leases which requires lesseessupply agreements. From a lessor perspective, the timing and pattern of transfer are the same for the non-lease components and associated lease component and, the lease component, if accounted for separately, would be classified as an operating lease.

We have elected not to recognize lease liabilities and right-of-use (ROU) assetspresent short-term leases on the balance sheet for most operating leases. We made the accounting policy election not to apply the recognition provisions of ASC 842 to short-termas these leases which are leases withhave a lease term of 12 months or less. Instead,less at lease inception and do not contain purchase options or renewal terms that we recognize theare reasonably certain to exercise. All other lease payments for short-term leases on a straight-line basis over the lease term.

Operatingassets and lease liabilities reflect our obligation to make future lease payments for real estate locations. Lease terms are comprisedrecognized based on the present value of contractual terms. Payments are discounted using the rate we would pay to borrow amounts equal to the lease payments over the lease term (ourat commencement date. Because our lease does not provide an implicit rate of return, we used our incremental borrowing rate). We do not separaterate based on the information available at lease and non-lease components for contractscommencement date in whichdetermining the present value of lease payments.

In general, leases, where we are the lessee. ROU assets are measured based on lease liabilities adjusted for incentives and timing differences between operating lease expense and payments, recognized on a straight-line basis overlessee, may include options to extend the lease term. OperatingThese leases may include options to terminate the lease prior to the end of the agreed upon lease term. For purposes of calculating lease liabilities, lease terms include options to extend or terminate the lease when it is reasonably certain that we will exercise such options.

Lease expense for operating leases is recognized on a straight-line basis over the lease term while variableas cost of revenues or operating expenses depending on the nature of the leased asset. Certain operating leases provide for annual increases to lease payments based on an index or rate. We calculate the present value of future lease payments based on the index or rate at the lease commencement date.

Differences between the calculated lease payment and actual payment are recognizedexpensed as incurred. Common area maintenance and other executory costs areAmortization of finance lease assets is recognized over the main componentslease term as cost of variable lease payments. Operating and variable leaserevenues or operating expenses are recorded in general and administrative expense independing on the Condensed Consolidated Statementsnature of Operations.

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NOTE 3  - PROPERTY AND EQUIPMENTthe leased asset.

On December 2, 2022, and effective on January 1, 2023, the Company signed a two-year lease of 1,145 square feet for our principal offices in Clearwater, Florida. The monthly rent is $2,134 in year one and increases to $2,198 in year two. The lease expires on December 31, 2024.

The tables below present information regarding the Company’s operating lease assets and liabilities at December 31, 2023 and September 30, 2023:

At December 31, 20222023, the Company has no financing leases as defined in ASC 842, “Leases.”

Future minimum lease payments required under leases that have initial or remaining non-cancelable lease terms in excess of one year at December 31, 2023:

NOTE 3 – PROPERTY, EQUIPMENT AND INTANGIBLE ASSETS

At December 31, 2023 and September 30, 2022,2023, property and equipment, net, is as follows:

Depreciation expense for the three months ended December 31, 2023 and 2022, was $1,357and 2021, was $1,080 and $814,$1,080, respectively.

At December 31, 2023 and September 30, 2023, intangible assets, net, is as follows:

Amortization expense for the three months ended December 31, 2023 and 2022, was $0 and $0, respectively.

NOTE 4 - EQUITY TRANSACTIONS

Preferred Stock Dividends

As of December 31, 20222023 and September 30, 2022,2023, the cumulative arrearage of undeclared dividends for Series A Preferred stock totaled $175,487$216,524 and $165,035, respectively.$205,658, respectively and $10,343 for the three months ended December 31, 2023.

As of the date of this report, we have 200,000,000 authorized shares of preferred stock, par value $0.00001 $0.00001 per share, of which 7,525,403 7,317,403 shares were issued and outstanding. There are currently 5 series of preferred stock designated as follows:

Pursuant to our Articles of Incorporation establishing our preferred stock:

Common stock issued for Conversion of C Preferred

During the three months ended December 31, 2022, the holder of Series C preferred stock, converted 132,000 shares of Series C Preferred Stock into 661,000 shares of Common Stock at the stated conversion rate with no gain or loss recognized.

NOTE 65 - RELATED PARTY TRANSACTIONS

Through December 1, 2021, the Company leased its office space from VoiceInterop, the Company's former wholly owned subsidiary and now 96% owned by our shareholders for approximately $1,400 per month. On February 14, 2020, VoiceInterop was deconsolidated and is no longer our subsidiary.

Rent expense incurred during the three months ended December 31, 2023 and 2022 was $0and 2021 was $2,343 and $5,886,$2,343, respectively (See Note 7)6).

During the three months ended December 31, 2023 and 2022, the Company paid $12,000 and $9,000, respectively, to a related party consultant.

As of December 31, 2022, the Company advanced $53,302$53,302 to VoiceInterop, the Company'sCompany’s former wholly owned subsidiary and now 96% owned by our shareholders. The amount is included in due from related party on the consolidated balance sheet. The amount is due on September 30, 2024, and bears interest at 5% effective October 1, 2022. As of December 31, 2022,2023, the Company recorded $666$3,427 in interest receivable – related party.

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NOTE 76 - COMMITMENTS AND CONTINGENCIES

Obligation Under Operating Lease

On December 2, 2022, and effective on January 1, 2023, the Company signed a two-year lease of 1,145 square feet for our principal offices in Clearwater, Florida. The monthly rent is $2,134$2,134 in year one and increases to $2,198$2,198 in year two. The lease expires on December 31, 2024. On January 1, 2023, upon adoption of ASC 842, the Company will recognize right-to-use assets as operating leases and operating lease obligations.

On December 1, 2021, the Company signed a one year lease approximately 2,000 square feet for our principal offices in Boca Raton, Florida. The monthly rent is $2,200.$2,200. The lease expired on November 30, 2022.2022.

Rent expense incurred during the three monthsyears ended December 31,September 30, 2023 and 2022 was $22,722and 2021 was $2,343 and $5,886, respectively (See Note 6).$26,973, respectively.  

Revenue and Accounts Receivable Concentration

For the three months ended December 31, 2023, one customer accounted for 12.72% of the Company’s revenues.

For the three months ended December 31, 2022, one customer accounted for 16% of the Company's revenues. 

For the three months ended December 31, 2021, one customer accounted for 14% of the Company'sCompany’s revenues.

As of December 31, 2022,2023, no customerscustomer accounted for more than 10% of the Company'sCompany’s total outstanding accounts receivable.

As of September 30, 2022,2023, no customer accounted for more than 10% of the Company'sCompany’s total outstanding accounts receivable.

Deferred Revenue Concentration

As of December 31, 2023, one customer accounted for more than 33% of the Company’s total outstanding deferred revenue.

As of September 30, 2023, no customer accounted for more than 10% of the Company’s total outstanding deferred revenue.

Major Supplier and Sole Manufacturing Source

The Company relies on no major supplier for its products. The Company has contracted with local manufacturing facilities to provide completed circuit boards used in the assembly of its IP gateway devices. Interruption of adequate supply of components, primarily computer chips, to the manufacturing source presents additional risk to the Company. The Company believes that additional commercial facilities exist at competitive rates to match the resources and capabilities of its existing manufacturing source, but the current worldwide shortage of computer chips does limit our ability to supply our proprietary radio gateways to clients and other buyers .buyers.

Employment Agreements

In December 2016, the Board of Directors accepted the resignation of Larry M. Reid as Chief Executive Officer of the corporation and appointed Mr. Reid as Chief Financial Officer. The Board also appointed Michael M. Moore as Chief Executive Officer.

Under the terms of an employment agreement effective on November 28, 2016, Mr. Moore as CEO receives an annual salary of $200,000. The term of agreement is for a one-year period beginning on the effective date and shall automatically renew and continue in effect for additional one-year periods. Effective April 20, 2022, the annual compensation increased to $220,000.

Under the terms of an employment agreement effective on March 13, 2015, Mr. Reid as CFO receives an annual salary of $96,000. The term of agreement is for a one-year period beginning on the effective date and shall automatically renew and continue in effect for additional one-year periods. Effective October 1, 2021, the annual compensation increased to $104,000.

Exclusive Licensing Agreement

On May 5, 2017, the Company entered into an Exclusive Licensing Agreement with Sublicensing Terms (the "Agreement"“Agreement”) with the University of South Florida Research Foundation, Inc. ("USFRF"(“USFRF”) relating to an exclusive license of certain patent rights in connection with one of USFRF'sUSFRF’s U.S. Patent Applications. Both parties recognize that the research and development work provided by the Company was sufficient for USFRF to enter into the Agreement with the Company.

The Agreement is effective April 25, 2017 and continues until the later of the date that no Licensed Patent remains a pending application or an enforceable patent or the date on which the Licensee'sLicensee’s obligation to pay royalties expires.

The Company agreed to pay USFRF a royalty of 3% for sales of all Licensed Products and Licensed Processes and agreed to pay USFRF minimum royalty payments as follows:

-and everyof $8,000 for fiscal year 2022 and thereafter on the same date, for the life of the agreement.

In the event the Company proposes to sell any Equity Securities, then USFRF will have the right to purchase 5% of the securities issued in such offering on the same terms and conditions are offered to other purchasers in such financing. As of December 31, 20222023 and 2021,2022, the Company has recorded $3,640$9,090 and $2,953$3,640 for the minimum royalty for the fiscal year ended 20222023 and 2021.2022.

NOTE 9 - SUBSEQUENT EVENT7 – EXTINGUISHMENT OF LIABILITIES

During the three months ended December 31, 2023, the Company recorded a gain on extinguishment of liabilities $44,052 related to amounts due to vendors that exceeded the statute of limitations.

On January 6, 2023, the Board of Directors approved a stock repurchase program pursuant to which the Company may repurchase shares of its outstanding common stock. The repurchase program may be extended, suspended, or discontinued at any time.

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Item 2. Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations.

FORWARD-LOOKING STATEMENTS

The information set forth in this Management'sManagement’s Discussion and Analysis contains certain "forward-looking“forward-looking statements,"” including, among others (i) expected changes in our revenues and profitability, (ii) prospective business opportunities, and (iii) our strategy for financing our business. Forward-looking statements are statements other than historical information or statements of current condition. Some forward-looking statements may be identified by use of terms such as "believes," "anticipates," "intends,"“believes,” “anticipates,” “intends,” or "expects."“expects.” These forward-looking statements relate to our plans, objectives, and expectations for future operations. Although we believe that our expectations with respect to the forward-looking statements are based upon reasonable assumptions within the bounds of our knowledge of our business and operations, in light of the risks and uncertainties inherent in all future projections, the inclusion of forward-looking statements in this prospectus should not be regarded as a representation that our objectives or plans will be achieved. In light of the risks and uncertainties, there can be no assurance that actual results, performance, or achievements will not differ materially from any future results, performance, or achievements expressed or implied by such forward-looking statements. The foregoing review of important factors should not be construed as exhaustive. We undertake no obligation to release publicly the results of any future revisions we may make to forward-looking statements to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events.

Overview

Cleartronic, Inc. (the "Company"“Company”) was incorporated in Florida on November 15, 1999. All current operations are conducted through the Company'sCompany’s wholly owned subsidiary, ReadyOp Communications, Inc. ("ReadyOp"(“ReadyOp”), a Florida corporation incorporated on September 15, 2014. ReadyOp facilitates the marketing and sales of subscriptions to the ReadyOp^™ and ReadyMed^™ platform and the AudioMate IP gateways discussed below.

ReadyOp is a proprietary, innovative web-based planning, communications and operations platform for efficiently and effectively planning, managing, communicating, and directing operations and emergency response. ReadyOp is used by local, state and federal government agencies, corporations, school districts, utilities, hospitals and others to manage and report daily operations as well as the ability to handle incidents and emergency situations. ReadyOp is offered as a software as a service (SAAS) program on an annual contract basis although an increasing number of clients have requested multi-year agreements.

In March 2018, the Company approved the spin-off of VoiceInterop, Inc. ("Voiceinterop"(“Voiceinterop”), one of the Company'sCompany’s wholly-owned subsidiaries, into a separate company under a Form S-1 registration filed with the United States Securities and Exchange Commission.

In October 2019, the Company acquired the ReadyMed software platform from Collabria LLC. ReadyMed is a web-based secure communications platform initially designed for the healthcare industry. This includes hospitals, clinics, doctor'sdoctor’s offices, health insurance companies, workers compensation insurance companies and many other segments of the healthcare industry. The platform provides caregivers with patient tracking capability and allows physicians and other healthcare entities to track patient progress after medical treatment and/or release from hospital care. The software also enables monitoring and reporting of patients in medium and long-term care. Additionally, the platform provides secure communications capabilities and record keeping to track the healing process of patients, record their recovery and monitor their medications. ReadyMed hasproved beneficial for multiple clients in the healthcare industry due to the impact of the COVID-19 pandemic. The Company offers both the ReadyOp and ReadyMed capabilities to clients and usually refers to the platform as ReadyOp to avoid confusion in the marketplace of two products.

FOR THE THREE MONTHS ENDED DECEMBER 31, 20222023 COMPARED TO THE THREE MONTHS ENDED DECEMBER 31, 20212022

Revenue

Revenues decreased 2.41%increased 19.62% to $606,047 for the three months ended December 31, 2023 as compared to $506,650 for the three months ended December 31, 2022. The primary reason for the increase was due to an increase in revenue from the ReadyOp platform from $460,244 in 2022 as compared to $519,185$589,547 in 2023. Sales of ReadyOp hardware products increased from $6,125 in 2022 to $16,500 in 2023. Consulting fees and related income decreased from $40,281 in 2022 to $0 in 2023 due to less training activity.

Cost of Revenue

Cost of revenues increased to $95,631 for the three months ended December 31, 2021. The primary reason for the decrease was due to a decrease in sales of ReadyOp hardware products from $32,000 in 2021 to $6,125 in 2022. Revenue from the ReadyOp platform increased from $449,500 in 2021 to $460,244 in 2022. Consulting fees and related income increased from $37,685 in 2021 to $40,281 in 2022 due to more training activity and conference income.

Cost of Revenue

Cost of revenues decreased2023 as compared to $77,491 for the three months ended December 31, 2022 as compared to $92,2362022. Gross profits were $510,416 and $429,159 for the three months ended December 31, 2021. Gross profits were $429,1592023 and $426,9492022, respectively.

Operating Expenses

Operating expenses increased 31.15% to $541,149 for the three months ended December 31, 2022 and December 31, 2021, respectively. Gross profit margins increased from 82% for the three months ended December 31, 20212023 compared to 85%$412,624 for the three months ended December 31, 2022. The increase in gross profit and gross profit margin was primarily due to the increase in sales of subscriptions to the ReadyOp platform and the decrease in sales of hardware products.

Operating Expenses

Operating expenses increased 12.57% to $412,624 for the three months ended December 31, 2022 compared to $366,534 for the three months ended December 31, 2021. The increase was primarily due increases in administrative expense and slightly offset by decrease in selling expenses. General and administrativeAdministrative expenses increased by $193,983$84,100 or 151.65%26.13% as a result of thean increase in general business expenses. This increase was primarily due to salaryconsulting expenses included as part of general business expenses, charitable contributions, and employee holiday bonuses. For the three months ended December 31, 2022,2023, selling expenses were $67,831$120,235 compared to $188,545$67,831 for the three months ended December 31, 2021. This decrease was primarily2022 due to a decreasean increase in commissions expense, with an offset byallowance for credit losses and an increase in advertising and travel expenses.expenses in connection with the trade show. Research and development expenses were $49,260$13,559 for the three months ended December 31, 2021,2023, as compared to $21,815 for the three months ended December 31, 2022. This decrease was primarily indirect research and development costs.

Other Income/(Expenses)

The Company’s other income increased by $47,851 from other income of $549 during the three months ended December 31, 2022, as compared to $48,400 for the three months ended December 31, 2023. This increase was an increase in interest income on note receivable due from a related party, interest income on treasury bill investments and extinguishment of liabilities of $44,052.

Income before Income Taxes

The Company’s income before income taxes was $17,667, during the three months ended December 31, 2023, as compared to income of $17,084 for the three months ended December 31, 2022. The increase was primarily due to a decreasean increase in cost of revenues, administrative and selling expenses, associated withand offset by an increase in sales of ReadyOp licenses and hardware and extinguishment of liabilities.  The increased costs were partially due to an increase in the developmentcosts of a new technology associated with a patent owned by the University of South Florida Research Foundation. The Company has obtained the exclusive licensehardware sold and administrative expenses due to develop and market the technology associated with the patent. salaries.

Other Income/(Expenses)Net Income Attributable to Common Stockholders

The Company's otherNet income increased by $717 from other income of $542 during the three months ended December 31, 2022 as comparedattributable to $168 in other expenses,common stockholders was $7,324 for the three months ended December 31, 2021. The primary reason for this increase was an increase in interest income on note receivable due from a related party.  

Income before Income Taxes

The Company's income before income taxes was $17,084, during the three months ended December 31, 2022,2023 as compared to $60,247 for the three months ended December 31, 2021. The decrease was primarily due to an increase in administrative and research and development expenses and a decrease in salesnet income of ReadyOp hardware products. The increased costs were partially increase in subscription of ReadyOp software and consulting income in 2022.

Net Income Attributable to Common Stockholders

Net income attributable to common stockholders was $6,740 for the three months ended December 31, 2022 as compared to a net income of $49,903 for the three months ended December 31, 2021.2022. The decreaseincrease was primarily due to an increase in administrative and research and development expenses and a decrease in sales of ReadyOp licenses and hardware products.and offset by an increase in cost of revenues, administrative and selling expenses. The increased costs were partially due to an in increase in subscriptionsthe costs of ReadyOp softwarethe hardware sold and consulting income in 2022 while preferred stock dividends remained consistent.  administrative expenses due to salaries.

LIQUIDITY AND CAPITAL RESOURCES

For the three months ended December 31, 2023, net cash provided by operations of $378,588 was the result of a net income of $17,667, depreciation expense of $1,357, amortization of operating lease of $5,982, extinguishment of liabilities of $44,052, increase in provision for credit losses of $29,000, increase in prepaid expenses of $17,756, and an increase in accounts payable of $7,731. These were offset by a decrease in accounts receivable of $40,008, a decrease in inventory of $5,733 and an increase in deferred revenue of $350,204.

For the three months ended December 31, 2022, net cash used in operations of $188,014 was the result of a net income of $17,084, depreciation expense of $1,080, an increase in accounts payable of $32,933, and a decrease in prepaid expenses of $9,280.  These were offset by an increase in accounts receivable of $24,752 and a decrease in deferred revenue of $223,639.

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For the three months ended December 31, 2021, net cash used in operations of $17,849 was the result of a net income of $60,247, depreciation expense of $814, an increase in accounts payable of $26,406, a decrease in accounts receivable of $46,867, a decrease in prepaid expenses of $33,364.  These were offset by an increase in inventory of $6,588, an increase in due from related party of $6,386, and a decrease in deferred revenue of $172,573.

Net cash used in investing activities was $0 and $5,058 for the three months ended December 31, 2022 and 2021, respectively, which was for the purchase of fixed assets.

Critical Accounting Estimates

See "Management's“Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates"Estimates” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022September 30, 2023 for information regarding our critical accounting estimates.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4. Controls and Procedures.

An evaluation was conducted by the registrant'sregistrant’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO) of the effectiveness of the design and operation of the registrant'sregistrant’s disclosure controls and procedures as of December 30, 2022.31, 2023. Based on that evaluation, the CEO and CFO concluded that the registrant'sregistrant’s controls and procedures were effective as of such date to ensure that information required to be disclosed in the reports that the registrant files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Change in Internal Controls over Financial Reporting

ThereDuring this quarter, there was no change in the registrant'sregistrant’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a–15 or Rule 15d–15 under the Securities Exchange Act of 1934 that occurred during the registrant'sregistrant’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant'sregistrant’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Cleartronic is not engaged in any litigation at the present time and management is unaware of any claims or complaints that could result in future litigation. Management will seek to minimize disputes with the Company'sCompany’s customers but recognizes the inevitability of legal action in today'stoday’s business environment as an unfortunate price of conducting business.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 The registrant claimed exemption from the registration provisions of the Securities Act of 1933 with respect to the securities pursuant to Section 4(2) thereof in as much as no public offering was involved. The shares were not offered or sold by means of: (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar medium, or broadcast over television or radio, (ii) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising, or (iii) any other form of general solicitation or advertising and the purchases were made for investment and not with a view to distribution. Each of the purchasers was, at the time of the purchaser'spurchaser’s respective purchase, an accredited investor, as that term is defined in Regulation D under the Securities Act of 1933 and had access to sufficient information concerning the registrant and the offering.

Item 3. Defaults Upon Senior Securities

None

Item 5. Other Information

None

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Item 6. Exhibits.

____________

*Filed herewith.

**Previously filed.

SIGNATURES